CNBC Exclusive: Palm Shareholder Expects Motorola Deal Soon

A major Palm shareholder told CNBC he expects Motorola to announce as soon as Thursday a deal to acquire Palm for roughly $2 billion.

The shareholder, who preferred not to be identified or have his stake disclosed, confirmed that Morgan Stanley was contacted by Palm in January to shop the troubled hand-held device maker and that the process intensified a couple of weeks again.

That was when Motorola finally got into the game, this shareholder said. Prior to that, negotiations were limited to Nokia and two private equity firms, Silver Lake Partners and Texas Pacific Group.

Palm Takeover Talk Heats Up

Palm shares climbed on speculation that the company will announce a buyer before tomorrow's earnings announcement. Jim Goldman, CNBC Silicon Valley bureau chief, has the story.

For the last two weeks or so, all four have been involved, the shareholder said. And now it appears that it will all boil down to Motorola, which the shareholder said is the right move for both companies.

"For Motorola, I think it's the threat of Nokia owning Palm," the shareholder told CNBC. "The upside for Motorola is much greater. If they own Palm, they're really the most substantial player running the windows (mobile) operating system. Motorola could become a key Microsoft partner."

"They (Palm) generate a lot of cash," the shareholder added. "Paying $2 billion in cash for a company generating $120 million in free cash flow is not a stretch. They could pay up to $25 a share and the deal would still be accretive. Accretive immediately."

He also said that Motorola and Palm's futures ride on this deal as the wireless world prepares to take on Apple Computer.

Of course, this isn't a done deal yet, considering all the major players involved, so Palm shareholders have to be prepared for surprises.